Legislature(1999 - 2000)
02/03/2000 11:04 AM House O&G
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
February 3, 2000
11:04 a.m.
COMMITTEE CALENDAR
Presentation by BP on Gas Commercialization
TAPE
00-9, SIDES A and B
CALL TO ORDER
Representative Whitaker, Chairman, convened the House Special
Committee on Oil and Gas meeting at 11:04 a.m.
PRESENT
Committee members present at the call to order were
Representatives Dyson, Smalley, Porter, Green and Kemplen.
Representatives Harris, Phillips and Brice arrived as the
meeting was in progress.
SUMMARY OF INFORMATION
CHAIRMAN WHITAKER announced that this meeting was part of the
committee's continuing effort to determine the status of the
efforts being made to commercialize North Slope gas. He then
introduced Mr. Ken Konrad of BP/Amoco.
KEN KONRAD, Business Unit Leader, Alaska Gas Business Unit,
BP/Amoco, began his presentation by describing British
Petroleum's position in the gas industry as a result of the
merger with Amoco. He stated that BP/Amoco is committed to
growing its gas business, which will be driven by a gas and power
division with revenues exceeding $5 billion annually. He
explained the company's view of the overall trend of energy
consumption, describing a rise of about 2 percent per year, and
said that the global gas and power economy is about twice the
size of the global oil economy. As gas is emerging as the
preferred hydrocarbon source, it is catching up with oil in
BP/Amoco's business priorities.
MR. KONRAD said that most of BP/Amoco's gas resources are ideally
located close to the world's major gas markets, with Alaska being
the exception. BP/Amoco has established a business unit with the
sole priority of investigating options to commercialize Alaska
gas, including export of liquefied natural gas (LNG) to the Far
East, gas pipeline options exporting gas to the North American
market, and conversion to liquids and transport down the Trans
Alaska Pipeline System (TAPS).
MR. KONRAD then went on to describe the volumes of oil and gas
estimated to remain on the North Slope, mentioning Prudhoe Bay
and Point Thomson and efforts by various owners to seek
commercial solutions to developing the more challenging fields.
Mr. Konrad explained the importance of gas in the recovery of
oil, describing the process and amounts of gas currently used in
that effort. He pointed out that until they are able to export
gas from the North Slope, oil producers there will continue to
use gas to improve oil recovery.
MR. KONRAD described efforts to achieve a major North Slope gas
sale, dating back to the 1970's, including a number of LNG
studies, gas-to-liquid (GTL) studies and various pipeline
options. He explained that all the options are still in play
because of a recent convergence of events resulting in a new
opportunity to commercialize Alaskan gas. One of those events is
a technology push that lowered overall project costs. The second
event is market pull, and the third is that governments are
working with industry to support gas developments.
MR. KONRAD then moved on to where BP/Amoco is today in its effort
to move Alaskan gas to market. He described their resource
position with 26 trillion cubic feet of known Prudhoe Bay gas,
Alaska's politically stable environment, and BP/Amoco's
involvement in the Alaska North Slope Liquefied Natural Gas
Project Sponsor Group. BP/Amoco still faces the challenge of
distance from market, resulting in the company's interest in
multiple commercialization options including GTL's, LNG export,
and other pipeline projects.
MR. KONRAD stated that BP/Amoco will locate its global gas
technology center in Anchorage after approval of the company's
merger with Atlantic Richfield Company (ARCO). He then explained
the work BP/Amoco is doing with syngas technology, including
engineering for a $70 million pilot facility in Alaska. ARCO has
an operating GTL pilot facility at the Cherry Point, Washington,
refinery, and completion of the merger would allow the companies
to share their technologies. He stated that ultimately, a GTL
project could be pursued in conjunction with an LNG project or
gas pipeline project.
MR. KONRAD told the committee that BP/Amoco didn't see a window
for LNG sales to the Far East, but rather, believed there would
be a steadily growing demand. With regard to a gas pipeline to
the Lower 48, he described two major routes, a southern route
following the Alaska Highway through Fairbanks and continuing on
to Canada, commonly known as the "ANGTS" line, and a northern
route following the Alaskan coastline to the Mackenzie Delta and
then south through Canada. He said the northern route is
generally considered to be less expensive with costs around $6
billion, but the southern route may have existing permits and
potential synergies with an LNG export option.
MR. KONRAD closed by reiterating that BP/Amoco is committed to
growing its gas business, working to mature a range of gas
commercialization options, and driven by a clear understanding of
what is possible. He then made himself available for questions
from committee members.
REPRESENTATIVE WHITAKER thanked Mr. Konrad, complimenting him on
an excellent presentation.
REPRESENTATIVE PHILLIPS asked Mr. Konrad for more detail
regarding the pilot test facility project and on whether the
timing depended on the merger.
MR. KONRAD replied that they were conducting front-end
engineering, which they hoped would be finished in several
months, and that they would pursue that project upon completion
of the ARCO merger.
REPRESENTATIVE GREEN asked whether BP/Amoco was negotiating with
Exxon Mobil Corporation to come together with the two companies'
GTL technology, and whether the outcome of the merger effort
would have a bearing on their decision.
MR. KONRAD answered that the company was continuing to work as a
member of the gas pipeline sponsor group, talking with Exxon
about their progress with GTL, and talking with various pipeline
project companies.
REPRESENTATIVE DYSON asked that they, (Mr. Konrad and the
committee members), not speak in code, saying that people who are
not familiar with the industry vernacular would not understand
the information.
REPRESENTATIVE KEMPLEN asked if it was the intent of BP/Amoco to
contract with the university to do applied research.
MR. KONRAD said they were starting to do that.
REPRESENTATIVE KEMPLEN asked when the gas technology center would
be open.
MR. KONRAD said it was well under way, but full completion would
not occur until the BP/Amoco merger with ARCO was complete.
REPRESENTATIVE HARRIS asked if there was a time projected when it
would no longer be cost effective to re-inject gas.
MR. KONRAD answered that oil producers will always inject gas
while they are producing the reservoir, unless there were a major
gas sale, at which point they would have to find some other
liquid to inject.
REPRESENTATIVE SMALLEY agreed with Representative Dyson's comment
about the use of industry vernacular, and requested a copy of Mr.
Konrad's presentation.
REPRESENTATIVE PHILLIPS asked Mr. Konrad if he could foresee a
pipeline going to the Lower 48 without Alaska being part of it.
MR. KONRAD said conceivably yes, but that there was plenty of
resource for many different projects.
REPRESENTATIVE DYSON asks Mr. Konrad to define "netback" and
"TAPS," then expressed dissatisfaction with the vernacular used
in Mr. Konrad's answer. He then asked how much gas BP/Amoco
controls in Canada, and followed up by asking whether BP/Amoco
would tend to make more money from the sale of its Canadian gas
than from Alaskan gas, and whether BP/Amoco is now producing from
all of its gas holdings. He also asked Mr. Konrad whether the
production of gas would diminish the amount of oil production at
Prudhoe.
MR. KONRAD said BP/Amoco was the largest gas producer in Canada
and went on to point out that the North American market is not
bottomless, but very big, indeed. As to the gas profitability,
he said each project is judged on its independent economics as
opposed to comparing economics with another project. He also
said to the best of his knowledge, BP/Amoco was currently
producing from all of its gas holdings in Canada. As to the
production of gas affecting oil production, he said it would, and
that economics would drive the decision.
REPRESENTATIVE KEMPLEN asked if a project to develop coal
reserves near the North Slope would be feasible. He also asked
if Mr. Konrad thought a pipeline coming down to Fairbanks, and
branching off to the lower 48 and then down to either Valdez or
the Cook Inlet was feasible. He also asked if it were possible
for the "consortium" he represents to serve as a pipeline manager
for a port authority. He went on to ask if, given the level of
risk in the security of Indonesian gas, those customers may look
for a more secure source of supply, such as Alaska.
MR. KONRAD said he did not know about the economics of North
Slope coal, and regarding the feasibility of the pipeline
branching off, he thought it could be done. He also said that
with regard to the market seeking a more secure supply of gas, he
thought that it would.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
The meeting adjourned at 11:50 a.m.
NOTE: The meeting was recorded and handwritten log notes were
taken. A copy of the tape and log notes may be obtained by
contacting the House Records Office at 129 6th Street, Suite 229,
Juneau, Alaska 99801-2197, (907) 465-2214, and after adjournment
of the second session of the Twenty-first Alaska State
Legislature this information may be obtained by contacting the
Legislative Reference Library at 129 6th Street, Suite 102, (907)
465-3808.
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